Correlation Between Unimicron Technology and Faraday Technology

Can any of the company-specific risk be diversified away by investing in both Unimicron Technology and Faraday Technology at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Unimicron Technology and Faraday Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Unimicron Technology Corp and Faraday Technology Corp, you can compare the effects of market volatilities on Unimicron Technology and Faraday Technology and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Unimicron Technology with a short position of Faraday Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Unimicron Technology and Faraday Technology.

Diversification Opportunities for Unimicron Technology and Faraday Technology

-0.38

Correlation Coefficient

Unimicron Technology  Faraday Technology

Very good diversification

The 3 months correlation between Unimicron and Faraday is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Unimicron Technology Corp and Faraday Technology Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Faraday Technology Corp and Unimicron Technology is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Unimicron Technology Corp are associated (or correlated) with Faraday Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Faraday Technology Corp has no effect on the direction of Unimicron Technology i.e., Unimicron Technology and Faraday Technology go up and down completely randomly.

Pair Corralation between Unimicron Technology and Faraday Technology

Assuming the 90 days trading horizon Unimicron Technology Corp is expected to under-perform the Faraday Technology. In addition to that, Unimicron Technology is 1.04 times more volatile than Faraday Technology Corp. It trades about -0.17 of its total potential returns per unit of risk. Faraday Technology Corp is currently generating about -0.08 per unit of volatility. If you would invest  23,000  in Faraday Technology Corp on September 5, 2024 and sell it today you would lose (950.00) from holding Faraday Technology Corp or give up 4.13% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.65%
Values	Daily Returns

Unimicron Technology Corp  vs.  Faraday Technology Corp

Unimicron Technology Corp

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Unimicron Technology Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Unimicron Technology may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Faraday Technology Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Faraday Technology Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Unimicron Technology and Faraday Technology

The main advantage of trading using opposite Unimicron Technology and Faraday Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Unimicron Technology position performs unexpectedly, Faraday Technology can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Faraday Technology will offset losses from the drop in Faraday Technology's long position.

The idea behind Unimicron Technology Corp and Faraday Technology Corp pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Bonds Directory module to find actively traded corporate debentures issued by US companies.